The Government U-turned on scrapping Class 2 NICs given the "negative impacts it could have on some of the lowest earning in society"

Class 2 NICs is a tax self-employed people have to pay if they make profits of more than £6,025. It is currently £2.95 per week.

Now that the tax is no longer going to be shelved, it means around 3.4million self-employed workers who earn over the threshold will have to continue shelling out £153.40 a year.

But those earning under this threshold will benefit.

Self-employed workers who opt to pay the tax even though they don't have to can use it to build up their entitlement to other important benefits.

How to start saving for your pension early

HERE are some tips from Sarah Coles, a personal finance analyst, for Hargreaves Lansdown

Keep a spending diary. If you can’t imagine being able to afford to pay into a pension, keep a diary of what you spend.
This will help you spot where your money is going and how to free up some cash for your pension each month.

Cut your bills. By shopping around for gas and electricity, your mobile and media, you may well be able to free up cash to put into a pension each month – without giving up anything you love.

If you're employed, take full advantage of your workplace pension. The rules mean that if you pay into a pension, your employer has to pay in too.
Check what’s on offer on top of the minimums, because sometimes if you can manage to pay in a little extra, your employer will offer to pay more in too.

These include the basic state pension, the new state pension, contribution-based employment support allowance, maternity allowance and bereavement benefits.

As part of the Government's plans to scrap Class 2 NICs, it had proposed adding these benefits to Class 3 NICs, but these cost £14.65 a week - which is nearly a 400 per cent increase.

There had been fears from charities such as Citizens Advice that the change would leave many low earners unable to afford access to the state pension.

This is because you need at least 10 years' worth of NICs to qualify for it.

Meanwhile lobby group and charity the Low Incomes Tax Reform Group had said in the past that the plans could result in more people relying on other benefits later in life.

A written statement made by Robert Jenrick, the exchequer secretary to the Treasury, said: "This change was originally intended to simplify the tax system for the self-employed.

"We delayed the implementation of this policy in November to consider concerns relating to the impact on self-employed individuals with low profits.

"A significant number of self-employed individuals on the lowest profits would have seen the voluntary payment they make to maintain access to the state pension rise substantially.

Am I on track for a comfortable pension?

If you are only putting in the minimum amount for your workplace pension then you are not saving enough for a comfortable pension. Here's how much you'll need according to consumer group Which?

Which? reckon that you need to be saving £131 into your pension a month from age 20 to be able to have a comfortable pension

Anyone over 30 would have to save up to £198 a month.

If you start as late as 50 you need to be saving a staggering £633 a month to be able to have a £26,000 a year income when you retire.

These figures are assuming that your employer pays his or her part of your pension contributions.

You will also receive a state pension depending on how much national insurance you have paid over your working life, the maximum amount you can receive is £164.35 a week.

"Having listened to those likely to be affected by this change we have concluded that it would not be right to proceed during this parliament, given the negative impacts it could have on some of the lowest earning in our society."

He added that the Government "will keep this issue under review".

But Mike Cherry, national chairman of trade body the Federation of Small Businesses, argues that scrapping the tax isn't the solution.

He commented: "Rather than hitting more than three million self-employed people with this levy, the Treasury should have worked harder to develop more effective ways to protect around 300,000 low-earners and maintain their contributions for the state pension.

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